The static model is chosen to build the time series regression model. Ordinary Least Square (OLS) estimator, skewness/kurtosis test, correlation matrix, VIF/Tolerance coefficient, Breusch-Pagan-Godfrey Test, White Test, Breusch-Godfrey (LM) method, Newey-West test and Dickey-Fuller GLS test are implemented to build reliable time series regression model. The coefficients, p-value and beta coefficients are used to make meaningful inference. Engle-Granger cointegration test is used to investigate whether there are long-term relationship between six economic variables and three kinds of stock market index in China. Cointegration test can reflect whether stock price can efficiently respond to information from these six economic variables.

The empirical results from this dissertation tell investors pay attention to variation of exchange rate, growth rate of industrial production, growth rate of money supply 2 and real estate total value when they want to invest Chinese stock market. They also reflect that foreign investors and Chinese citizens who invest in the Chinese stock market have different response to the variation of economic variables.